11/08/2010 @ 6:00AM

The Most Trustworthy Companies In America

Recession and Ponzi schemes and bankruptcies, oh my. It’s a bear market for trust in the markets these days, with companies beset by troubles often giving little or no warning. In recent years, investors have been hurt by rapid reversals and unwise governance on the part of companies like Lehman Brothers, Washington Mutual, New Century Financial and Huron Consulting Group. Investors putting their faith–and money–into stocks are looking for companies worthy of their trust.

For the third time this year, Forbes turns to Audit Integrity, a Los Angeles-based financial analysis shop, to help identify the most trustworthy publicly traded companies. Using data from income statements and balance sheets, along with more than 100 qualitative factors, Audit Integrity assesses the soundness of corporate accounting and management practices. Audit Integrity then assigns an Accounting and Governance Risk rating to each company. A higher AGR represents financial and corporate management practices that have proven historically to be an indication of trustworthy companies.

Trust is built over time, though, so Audit Integrity expanded upon the current AGR to develop its Most Trustworthy Companies list. To qualify, organizations must have: “Average” or “Conservative” ratings and average AGR scores of 65 or more over at least eight quarters; an absence of Securities & Exchange Commission enforcement action, class action litigation, financial restatements or accounting issues during the past year; negligible risk of bankruptcy, as determined by Audit Integrity’s Bankruptcy Risk model; a relatively low proportion of incentive-based pay for the chief executive and chief financial officer; and no significant insider trading.

“We put these companies through a rigorous set of standards,” says Audit Integrity cofounder and chairman James A. Kaplan. “Less than 5% of the entire U.S. stock market qualifies for the list, and the companies that do have proven over time to be transparent and show fair governance.”

Kaplan points out that many of the companies on the Trustworthy List have maintained their high standard for quite some time.

“Approximately 130 of these companies have been persistently trustworthy, making our list for more than five straight years. These companies take their shareholders seriously,” he says. Ninety-three of the companies on our list are newcomers; the remainder of the 400 organizations have been on our Trustworthy list before.

The most trustworthy companies span a wide variety of industries, from Aerospace to Wireless Telecommunications. The same is true of the companies listed on the Forbes Risk List, for which Audit Integrity also supplies the data.

See below for the list of Most Trustworthy Companies. For more information on a specific company, click on its name.

Company

Industry

Months on list

AGR Score*

Report was prepared on Oct. 5, 2010.

*The AGR (Accounting and Governance Ranking) is a percentile score ranging from 0 to 100, with corresponding ratings from Very Aggressive (lowest scores) to Conservative (highest scores).